Recall that I posted this about Scribd back in April, linking to a Publisher's Weekly article that reported that such a deal was in the works. (I also posted this later the same day, so that you can read an entire book by Keynes via Scribd.)

My friend had this to say about this development, since we have been talking over the past year about the merits of the Sony and Amazon e-book readers: "This is big news. You might want to wait a while before buying a Kindle...if the other major publishers follow suit and join Scribd, which Ithink they will, the Kindle format is going to be in trouble (a la Betavs. VHS)."

Wednesday, May 06, 2009

James Surowiecki, the financial columnist for the New Yorker, has consistently been putting out insightful columns through the course of the financial crisis. His latest is a good one regarding the size of the banking/financial industry, aptly titled "Monsters, Inc."

Surowiecki puts this very timely issue in historical context, addressing the widespread notion that we need to go back to a simpler financial time:

The desire to bring back the boring, small banking industry of the nineteen-fifties is understandable. Unfortunately, the only way to do that would be to bring back the economy of the fifties, too. Banking was boring then because the economy was boring. The financial sector’s most important job is channelling money from investors to businesses that need capital for worthwhile investment. But in the postwar era there wasn’t much need for this. The economy, while remarkably strong, was dominated by huge companies that faced little competition, and could finance investments out of their profits. And entrepreneurship was restrained: there were many fewer start-ups then than in the period after 1980. So the financial sector didn’t have much to do.

Two things changed this. First, in the seventies those huge companies started tottering, while the U.S. economy fell apart. Second, the corporate world was transformed by revolutionary developments in information technology and by the emergence of new industries like cable television, wireless, and biotechnology. This meant that the economy became, and has remained, far more competitive, while corporate performance became far more volatile. In the nineteen-eighties, companies moved in and out of the Fortune 500 twice as fast as they had in the fifties and sixties. Suddenly, there were lots of new companies with big appetites for outside capital, which they needed in order to keep growing. And it was Wall Street that helped them get it. Companies like Turner Broadcasting, M.C.I., and McCaw Cellular used junk bonds to turn themselves into major businesses. Venture-capital investing took off, and so did the I.P.O. market; there were twice as many I.P.O.s between 1980 and 1999 as there were between 1960 and 1979. To be sure, deregulation was also a factor, but Thomas Philippon, an economist at N.Y.U., has shown that most of the increase in the size of the financial sector in this period can be accounted for by companies’ need for new capital.

Surowiecki goes back even further into the history (and reveals that he's really just outlining Philippon's paper with this column):

There have been three big banking booms in modern U.S. history. The first began in the late nineteenth century, during the Second Industrial Revolution, when bankers like J. P. Morgan funded the creation of industrial giants like U.S. Steel and International Harvester. The second wave came in the twenties, as electrification transformed manufacturing, and the modern consumer economy took hold. The third wave accompanied the information-technology revolution. Each wave, Philippon shows, was propelled by the need to fund new businesses, and each left finance significantly bigger than before. In all these cases, it wasn’t so much that the bankers had changed; the world had.

The same can’t be said, though, of the boom of the past decade. The housing bubble was unique, and uniquely awful.

Surowiecki goes on to say a few words about the housing bubble, and about how to get at "the harder task of making credit bubbles like the one we just lived through less likely." Oddly he doesn't mention securitization and the alchemy of financial engineering as a central culprit; he just mildly mentions that "many financial innovations also seem to be overrated; it’s not clear that they actually help finance do its core job of channelling capital to businesses."

The brief sketch of the history of modern US banking reminded me of an essay that was on the WSJ Op-Ed page last October, by John Steele Gordon, titled "A Short Banking History of the United States: Why our system is prone to panics", which opens with the lines: "We are now in the midst of a major financial panic. This is not a unique occurrence in American history. Indeed, we've had one roughly every 20 years: in 1819, 1836, 1857, 1873, 1893, 1907, 1929, 1987 and now 2008." But I will leave the rest aside for now, to blog another day...

Thursday, April 30, 2009

I happened to just now come across this column that appeared in the WSJ on April 2: "Bankrputcy is Vital to Capitalism", by David Wessel (who, I just learned (pdf here), is economics editor of the WSJ and writes this "Capital" column weekly).

Wessel opens the piece as follows:

America is relearning an old lesson: Failure and bankruptcy are essential to capitalism.

Bankruptcy is an orderly way to give an overburdened debtor a fresh start and to decide which creditors get paid back and which don't. As Nobel laureate Joseph Stiglitz teaches: Bankruptcy is a way to cope with those times when markets fail to allocate capital wisely and monitor its use.

(Stiglitz is an econ prof at Columbia, and, as the Wikipedia entry nicely summarizes:

The column continues with some historical context, connecting the railroad industry of the late 19th century to the auto industry of the early 21st century:

At the end of the 19th century, nearly 20% of the railroad track belonged to insolvent railroads, says David Skeel, a University of Pennsylvania law professor who has written a history of bankruptcy. With state governments unable to deal with railroads that stretched beyond their borders, and Congress hamstrung by a narrow interpretation of the Constitution, creditors turned to courts. Judges fashioned an approach to divvy up assets among creditors that was codified in an 1898 law, the spirit of which survives today.

General Motors and Chrysler are 21st century analogs of 19th century railroads. They cannot pay their debts; the only issue now is how, not whether, their creditors take a hit. The only difference between GM today and GM in bankruptcy court is that the president and his appointees are making the decisions, instead of a bankruptcy judge constrained by federal law.

Skeel is a name that seems to come up quite often in discussions about bankruptcy law. Indeed, it seems like he quite literally wrote the book on the topic: "Debt's Dominion: A History of Bankruptcy Law in America" (which I impulsively purchased from Amazon a couple days ago, after reading this WSJ column).

From there Wessel gets into how the Obama Administration has been handling the case of the auto companies. That is where I found it got somewhat confusing:

President Barack Obama's critics say the government has no business picking GM's chief executive and apportioning losses among auto workers, pensioners, suppliers and lenders. They fear "politics" will produce unfair or unwise decisions, such as protecting lenders and workers in the domestic auto industry at taxpayer expense while lenders and workers in less politically salient industries suffer.

But sometimes "politics" is just another word for "democracy." The people are having a hard time understanding why big banks and insurers get bailouts and GM gets bankruptcy. It's hard to convince laid-off auto workers that banks and their credit are the vital circulatory system of the U.S. economy, more important than any one industry, even one as large as domestic auto makers. Mr. Obama knows he almost certainly will need more taxpayer money to resuscitate the nation's banks; that won't be popular. If making a very public effort to avoid bankruptcy fails, he will say: I tried, but it just couldn't be done. That may help him get Congress to approve money for the banks.

I take this to mean that the "politics" the critics decry are a necessary part of the process in this environment. It's democracy at work, in the sense that the whole spectrum of stakeholders--not only equity and bondholders, but also labor, and even the wider community, as represented, say, by Michigan House reps and Senators--have an influence on the outcome, and that the Administration must take into account the political and economic context in approaching restructuring/bankruptcy of the auto companies.

Here are the closing paragraphs, which raise some very interestng points:

What about big financial houses, though? Why can't they go through bankruptcy the way Macy's and Delta Air Lines did? One reason is that a retailer or airline can shed debts and then operate stores and airplanes. Financial institutions have nothing so tangible: They basically have their names, their people and their ability to borrow a lot of money short term. All of that can vanish instantly while a judge ponders the matter. So the U.S. devised a bankruptcy substitute for banks: The Federal Deposit Insurance Corp. does the deed quickly without a judge.

The Treasury and the Federal Reserve want a similar pseudo-bankruptcy process for big financial institutions to avoid the problems of Lehman Brothers (whose bankruptcy coincided with a bad turn in the crisis and some say caused it) and American International Group (which didn't go into bankruptcy, at substantial cost to taxpayers). They want better choices next time, and they don't think conventional bankruptcy is practical.

Not everyone sees it that way. "The usual reaction if one mentions bankruptcy as a mechanism for addressing a financial institution's default is incredulity," Mr. Skeel and Northwestern University's Kenneth Ayotte wrote recently. "Those who favor the rescue of financial institutions...treat bankruptcy as anathema. Everyone seems to argue that nothing good can come from bankruptcy." They disagree, and would tweak bankruptcy laws to deal with the peculiarities of finance so the rules are clear to all -- and the Treasury secretary and Fed chairman have less discretion.

It will be interesting to see how the regulatory/legal framework evolves in this direction. As Wessel wrote, the Bankruptcy Act of 1898 was a reaction to the widespread insolvenices of the late 19th century (and was later revamped in the 1978 Bankruptcy Code--Chapters 7 and 11 of which govern, respectively, liquidation and reorganization.

Wednesday, March 25, 2009

"A general bonfire is so great a necessity that unless we can make of it an orderly and good-tempered affair in which no serious injustice is done to anyone, it will, when it comes at last, grow into a conflagration that may destroy much else as well."--John Maynard Keynes, "The Economic Consequences of the Peace" (1920)

A followup to my previous post, about Scribd: after coming to it via DeLong's blog, I created an account on Scribd, which I just revisited now. I had "favorited" a few documents..one of which is John Maynard Keynes's 1920 book, "The Economic Consequences of the Peace"--all 131 pages of it:

I had favorited it not only because Keynes is obviously in the news a lot these days (see this collection of links I put together a few months ago), but more specifically because Robert Shiller pointedly chose a passage from this particular work of Keynes as the introduction to the book he published last year.

In fact, now that I look at what I wrote in that entry about Keynes in December, I'm seeing I closed with the following:

A general bonfire is so great a necessity that unless we can make of it an orderly and good-tempered affair in which no serious injustice is done to anyone, it will, when it comes at last, grow into a conflagration that may destroy much else as well.

Consider why Shiller chose that passage (and that was back ~March 2008), and consider how our current economic conflagration has grown since then...

In fact, I was reminded of this after reading David Brooks's quite bitter column from last Saturday's NYT, titled "Perverse Cosmic Myopia"; here are the closing sentences:

Many people used to wonder how the world’s leaders could be so myopic at various points in history — like during the Versailles Treaty or the turmoil of the 1930s. We don’t have to wonder any more. We get to watch the cosmic myopia replay itself in our own times.

Scribd, Inc., the “social publishing site” that posts a variety of written documents daily, has signed deals with a number of publishers to post novels, chapters and other content on scribd.com. Among the publishers working with Scribd are the Random House Publishing Group, Simon & Schuster, Workman., Berrett-Koehler, Thomas Nelson and Manning Publications.

According to the company, more than 50,000 new documents are uploaded daily using Scribd’s iPaper reader, which makes it easy to upload, share and embed original writings and documents. Publishers who have signed on say they see using Scribd as a way to give greater exposure to their titles. Links allow users to buy a book.

The link about Scribd caught my eye b/c I'd come across Scribd via some blogs..specifically Brad DeLong's. For example, if you want to see Scribd in action, DeLong's review of Krugman's recent book, The Return of Depression Economics and the Crisis of 2008 is embedded on his blog here.

Actually, the beauty of Scribd is that it's portable--just like YouTube, they give you the html code to embed the content into any web page. Hence, here is DeLong's review of Krugman:

While it's certainly not the only document-sharing Web site, Scribd.com, with more than 50 million users and more than 50,000 documents uploaded daily, aims to be the YouTube for print...

Scribd's main feature is its iPaper application—a Flash reader that allows creators to upload original writings—which permits both uniform publication display of documents and content to be embedded from the Scribd.com site and easily shared. Documents can be downloaded for free, and iPaper allows users to embed text on their Web sites, blogs and on Twitter. Beyond book publishers, Scribd is working with publications like the New York Times and the Wall Street Journal to embed material in their online stories.

Friday, March 20, 2009

I'm getting better at posting video, etc..here is one I just heard about on NPR--an interview Hank Greenberg did with CBS this morning about AIG. The quote that caught my ear was the following: "It was the greatest company in history. In the insurance industry, there wasn't anything like it."

Greenberg built AIG into the largest insurance company in the world. After nearly 40 years at the helm, he was ousted in 2005 in the midst of an accounting scandal.

Here is the part with the killer quote:

Three CEOs followed Greenberg, but he singles out the current one, Edward Liddy, the government-appointed boss who denied blame this week on Capitol Hill.

Liddy told a congressional hearing, "In reviewing how AIG has been run in prior years, I've also seen evidence of its bad side. Mistakes were made at AIG on a scale few could have ever imagined possible."

Rodriguez: Edward Liddy seemed to imply that a lot of the mistakes at AIG were made when you were CEO."

Greenberg laughed at that.

Rodriguez: Do you accept any responsibility?

Greenberg: Absolutely not. It was the greatest company in history. In the insurance industry, there wasn't anything like it.

Over the centuries, the United States has been most conspicuous for one trait: manic energy. Americans work longer hours than any other people. We switch jobs more frequently, move more often, earn more and consume more.

This energy was first aroused by abundance, by the tantalizing sense that dazzling wealth was available just over the next hill. But it has also been sustained by a popular culture that celebrates commercial ambition. From Benjamin Franklin and Alexander Hamilton, through Horatio Alger and Norman Vincent Peale, up until Donald Trump and Jim Cramer, popular figures have always emerged to champion the American gospel of success, encouraging middle-class people to strive, risk and make money.

Brooks, after a handful of paragraphs of historical context, goes on to say:

In short, the United States will never be Europe. It was born as a commercial republic. It's addicted to the pace of commercial enterprise. After periodic pauses, the country inevitably returns to its elemental nature.

The U.S. is in one of those pauses today. It has been odd, over the past six months, not to have the gospel of success as part of the normal background music of life...That part of American culture that stokes ambition and encourages risk has gone silent.

We are now in an astonishingly noncommercial moment. Risk is out of favor. The financial world is abashed. Enterprise is suspended. The public culture is dominated by one downbeat story after another as members of the educated class explore and enjoy the humiliation of the capitalist vulgarians.

It was the closing paragraph that caught my attention:

Walt Whitman got America right in his essay, "Democratic Vistas." He acknowledged the vulgarity of the American success drive. He toted up its moral failings. But in the end, he accepted his country's "extreme business energy," its "almost maniacal appetite for wealth." He knew that the country's dreams were all built upon that energy and drive, and eventually the spirit of commercial optimism would always prevail.

I got to seek out this Whitman essay. In fact, I should get a collection of his writing..sad to say, I don't recall ever reading anything by him! That esp inexcusable now that we are residents of the borough of Brookyln...

I'm curious if/how Whitman believes the creative and democratic elements of society can thrive in what is, as Brooks has written, a decidedly commercial republic. I'd like to find out if Whitman was in fact as sanguine about that maniacal appetite for wealth as Brooks makes him out to have been..

In fact, a google search on "whitman democratic vistas" comes up with a link to what looks to be the full text of "Democratic Vistas" as well as the Amazon page for a collection titled "Democratic Vistas and Other Papers"; interestingly, the "product description" on the Amazon page (quite commercial, that) seems to directly contradict Brooks:

Walt Whitman (1819-1892) contributed to the greatest prose of American letters with Democratic Vistas, now considered a classic discussion of the theory of democracy and its possibilities. In this essay he protests the unrestrained materialism, greed, corruption and spiritual failure of what, two years later, Mark Twain would label "The Gilded Age." Whitman criticizes America for its "mighty, many-threaded wealth and industry" that mask an underlying "dry and flat Sahara" of soul. He calls for a new kind of literature to revive the American population: "Not the book needs so much to be the complete thing, but the reader of the book does."

This is indicative of what bothers me about Brooks: he'll come with an erudite, reasonable-sounding essay, but then put in a subtle, disingenuous twist to make the conservative viewpoint seem more reasonable than it deserves to be..

Monday, March 16, 2009

I still haven't uploaded all our photos from our trip to India last month..but I did upload a few of the numerous video clips I took. Here are two of them, both taken on the morning we walked with my aunt to the local market:

1) The chicken butcher; I snapped a few photos of these guys, after which they wanted to pose for me, which is when I shot this clip:

2) One of the many fishmongerers; same here, actually--this guy did a special pose for me when he saw I was taking photos. Not sure what type of fish he was dealing..I'll have to ask my parents if they can tell:

This is encouraging in some ways; seems clear that this is what it will take for the economy to turn around. Indeed, as the article refers to via a quote, it's the process of "creative destruction" of capitalism at work:

Mark V. Cannice, executive director of the entrepreneurship program at theUniversity of San Francisco, calls the phenomenon “forced entrepreneurship.”

“If there is a silver lining, the large-scale downsizing from majorcompanies will release a lot of new entrepreneurial talent and ideas —scientists, engineers, business folks now looking to do other things,” Mr.Cannice said. “It’s a Darwinian unleashing of talent into the entrepreneurialecosystem.”

Certainly there is a lot of financial and quantitative talent that's been released from Wall Street over the past year. Indeed, it's probably a good thing for our society that a smaller percentage of the most ambitious and accomplished college graduates aim to be something other than an analyst at an i-bank, and that fewer of our math, physics, and engineering PhDs end up working as something other than quants on Wall St.

Back to this grassroots entrepreneurship: I imagine/hope that this is what the GOP would like to support, instead of governemnt spending. But I haven't heard any concrete policy proposals for how they would do so; what I have heard is the mantra of more and more tax cuts--what they've been repeating for 30 years (the Age of Reagan, now seemingly coming to an end).

For starters, how about universal health care, so individuals can pursue entrepreneurial ventures w/o worrying about finding a job that includes decent health insurance for themselves and their dependents?

In 1999, John Kenneth Galbraith explained how to spot speculative excess:

Notable and Quotable, WSJ: From an address given by John Kenneth Galbraith at the London School of Economics in June 1999 called "The Unfinished Business of the Century":

We have far more people selling derivatives, index funds and mutual funds (as we call them) than there is intelligence for the task. I am cautious about prediction; I discovered years ago that my correct predictions are forgotten, the others meticulously remembered. But some things are definite; when you hear it being said that we have entered a new economy of permanent prosperity with prices of financial instruments reflecting that happy fact, you should take cover. This has been the standard justification of speculative excess for several centuries -- for a good part of the millennium. My one-time Harvard colleague Joseph Schumpeter thought inevitable and even beneficial what he called "creative destruction" -- the cyclical process by which the system eliminates the people and institutions which are mentally too vulnerable for useful economic service. Unfortunately the process has larger and less benign effects, including the possibility of painful recession or depression.

LSE has a full transcript of the 1999 lecture here (pdf). In fact, now that I'm skimming it, I think it's worth quoting what Galbraith said prior to the passage above:

The most serious [problem within economies] is the ancient and unsolved problemof instability – of the enduring sequence of boom and bust. The history goesback for centuries to the Tulipmania in Holland in 1637 and perhaps before, tothe early eighteenth century promise in Paris of gold in Louisianna – gold notyet discovered – and here to the South Sea Bubble. (In later years there was awonderful prospect for draining the Red Sea to recover the treasure left behindat the crossing of the Isrelites.) In the century, in the United States, aboutevery 30 years there was a sequence of boom and bust, including the Great Crashof 1929. The speculative crash, now called a correction, has been a basicfeature of the system. In the United States we are now having another exercisein speculative optimism following the partial reversal last year.

And also what Galbraith said immediately after noting that the "possibility of painful recession or depression":

Let us not assume that the age of slump, recession, depression is past. Let ushave both the needed warnings against speculative excess and awareness that theensuing slump can be painful. And there will then be need for specific remedialaction by the government. Keynes, one regularly reads, is out of fashion; his isa cyclical legacy that fades in good times, returns with recession.

Friday, February 06, 2009

Won't write much, since I'm in a cyber(/copy)shop in Chenai, paying Rs 240/hour for internet access. Here's a quick recap of the past week:

Arrived in Mumbai late Sat night (local time), after the 14 hr flight from JFK. Uncomfortable 6 hour layover in the domestic lounge before flying to Kolkata on Indian Airlines. Went straight to Garia, luchi and aloo for lunch. Afternoon in Ballygunge, then back to Garia for the evening.

Monday: finally made up to Pishi's place (just north of Gariahat) early afternoon, spent all afternoon there, into the evening. Bought a cell phone at a Nokia shop in Gariahat, cab back to Garia. Up way too late, sipping Glenfiddich while kaku lectured/reminsced.

Tuesday: went to bajar (macch, fruit & vegetables) with kaki, then back out with kaku for a couple errands on the main road. Soma came over for lunch (incl elish macch), then took a car to their flat in Bhowanipore. Met mamas and mamimas, watched end of the 3rd India-SL OID, late dinner there.

Wednesday: finally made it out ~noon, first to a jewelry shop, then Metro from Rabindra Sadan to Esplanade. Some shopping on Chowringhee (memorably, at a curio shop which has been there since 1953--I asked the owner, turned out his father moved to Kolkata from Sindh during Partition and opened the shop). Bought a couple books on Park St from a sidewalk seller ("Enchantress of Florence" & "White Tiger"), then lunch at Peter Kat. Dropped off some stuff back at the flat, then took a cab all the way out to the bypass, to look at the shops at Swabhumi. Unfort most shops were closed, so cabbed back to the Forum mall--bought some chappals, some CDs ("Slumdog" soundtrack (for Rs 150!), 4 disc set of mp3s), and a DVD ("Ghare Baire"). Nice espresso drinks at "CCD" (Cafe Coffee Day).

Thursday: back out to the bypass, but on to the airport. Boarded Jet flight to Chennai..straight from the airport to the banquet hall for lunch, checked in to the hotel (just up the road..Aditya Hotel!), then back for a ceremony and dinner. A handful of Madras coffees from the 24 hr coffee service setup.

Friday: up early for the wedding ceremony, preceded by dosa/iddli/sambar breakfast in the dining hall, followed by lunch. Afternoon off..walked back to the hotel (better & faster than driving), and then back out to find internet access..

..which is where I'm at now, in the Rahaat Plaza. Should prob head back to the hotel..though tempted to see if I can get a beer at the Ponnusamy Hotel/AC Restaurant, just upstairs in the plaza here.

More next week, from Kerala (Cochin, Wyanaad), Bangalore, and/or Delhi..

Friday, January 30, 2009

We just boarded an Air India flight, non-stop JFK to Mumbai. The next ~15 hours will be: Indian food, Hindi movies, hopefully some sleep, and working thru some of the reading material we brought: a pile of this week's newspapers (one of my favorite parts of flying..going thru and discarding a stack of paper) and starting the mere 2 books we packed..

Remarkable that we brought only 2 books: one fiction: "Inheritance of Loss" by K Desai; and one non-fiction, "The Argumentative Indian" by A Sen. The prior we picked up a last summer, at that bookstore across from Magnolia in the W Village (before a session with the Cornell guys @ Whitehorse); the latter Ina gave me as a birthday present a few years ago. This seemed like a good trip to finally read them.

Remarkable because I considered a whole shelf of books at various pts for this journey: Nehru's "Discovery of India", Niall Ferguson's "Empire" (see my previous post re Ferguson), "India: A Million Mutinues Now" by Naipaul, Gurcharan Das's "India Unbound", another more recent one about modern India by some guy named Luce.

Remarkable also that my reading interests have shifted so much to non-fiction. The only novels that I considered were "Midnight's Children" and "White Tiger"..til Anj suggested "Inheritance of Loss."

Lots of Indians on this flight..prob 95%. Actually, lots of South Asians in the terminal: in addition to the hundreds of Indians checking in for our flight, there were hundreds of add'l S Asians checking in at the Kuwait and Emirates Air counters (I say S Asian since my guess is that many were Bangladeshi..perhaps connecting to Dhaka? I certainly heard more than one person in the terminal speaking some very heavily East Bengal-accented Bengali!)

That reminds me of something else I'd planned to blog this week--previous trips to India (because in '95 we took Gulf Air via somewhere in the UAE, connected to Dhaka, and then Biman to Calcutta). I think this is my 8th or 9th trip to India: def '77, '84, '88, '95, '96, '01, and '02..and maybe one more prior to '77, but I'm not sure about that..will have to check with my parents.

But this is the first time I'll be visiting my extended family in Calcutta without my parents around..should be interesting. And also the very first time Anj and I will travel, just for a bit, on our own..

Monday, January 26, 2009

This is something I may try to make a regular (dare I say daily?) feature: a few links regarding top/interesting news stories. Here's what I see as today's top stories, based on my own interests and media sources:

The Senate votes later today on Pres Obama's nominess for Treasury Secretary, Tim Geither. He appeared before the Senate Finance Committee last Wednesday, with the committee voting 18-5 recommending confirmation. If you're very interested in this story, here is a blog post about part of Geithner's 102 (!) pages of written responses to the Finance Committee. More briefly, here are the first few paragraphs of a CNN Money summary from yesterday:

The Senate is set to meet Monday evening to vote on Tim Geithner's nomination as the next Treasury Secretary. Senate Majority Leader Harry Reid of Nevada has said he expects to hold a vote at 6 p.m. ET.Geithner is expected to easily win confirmation from the Democratic-controlled Senate. Democrats on Capitol Hill have spoken of the need to quickly confirm Geithner, who will spearhead President Obama's response to the financial crisis that threatens to unravel economic growth around the globe.Reid warned Friday that Republicans "would not be very wise politically" to try to hold up the nomination, which last week won the support of all the Democrats and half the Republicans on the Senate Finance Committee. He added that Democrats could block any attempt to filibuster.On Thursday, the committee recommended in an 18-5 vote that the full Senate confirm the appointment of Geithner, who is currently president of the Federal Reserve Bank of New York, to succeed Henry Paulson.

Much has been written about Geithner since Obama somewhat surprised by nominating him back in November. I've saved a bunch of what's been written about him--I'll get around to posting sometime over the next few weeks, since, assuming the confirmation goes through today, we'll be hearing a lot from and about Geithner over the next couple years.

The situation with the banking system continues to be very dicey; the latest debate is over outright nationalization. This debate has been raging among economists and other commentators in the blogopshere, occasionally bubbling up into the mainstream media. There is a News Analysis piece on the front page of this morning's NYT:

Go here for excerpts from and summary of the above, and here for a list of about 20 links to blog posts from the last few weeks about bank nationalization.

Finally, the big news on the business pages is a good old traditional M&A: Pfizer is going to acquire Wyeth. This is quite a big deal, both in the literal sense--Pfizer is paying ~$68bn for Wyeth; and in a figurative sense--some $22bn of that purchase price is being provided as credit by a consortium of five banks. This story also made the front page of the NYT, but for the sake of variety, here is this morning's WSJ article:

Sunday, January 25, 2009

Historian Niall Ferguson was interviewed by Fareed Zakaria for Zakaria's GPS show on CNN..I believe it was for the Jan 18 episode. The clip is below, pulled from the CNN website for GPS; it's only 8 1/2 mins, so give it a viewing:

Ferguson discusses the current financial crisis (the clip is titled "Is it bad"? on the GPS website), and segues into a discussion of his recently published book, The Ascent of Money: A Financial History of the World, by arguing that we need to put the current crisis into historical contect--that leads into a a discussion of the Great Depression and Japan in the 1990s. Ferguson identifies the prior as a worst-case scenario, the key difference being that governments and central banks are using very different monetary and fiscal policies to "repress" a depression scenario (and hence coins a nice phrase: "the Great Repression"). More interestingly, Ferguson points to the latter, Japan's "lost decade" of essentially zero economic growth, as not only a distinct possibility, but as a relativey good scenario! "We'd be getting off lightly if we can get by with a decade of 1% per annum growth," say Ferguson.

He continues: "At the moment, I'm really quite apprehensive that the process of deleveraging has far from run its course; there's no floor in sight in the real estate market. And these things have a self-perpetuating quality--one of the lessons of history is that depressions tend to feed on themselves. There is after all a pychological dimension to this: once people get really spooked, it's very hard for the market to find its bottom. And remember, stocks sold off between '29 and '33 by nearly 87%. So you have to have a sense of orders of magnitude here. Financial crises happen infrequently on this kind of scale, and that's why we need to have historical knowledge, to have an understanding of their dynamics."

(Ferguson touches on a lot of interesting topics here: the great deleveraging, still not completed after 18 months (I posted this re deleveraging in October, after hearing Sanford Grossman speak on the crisis); the pyschological dimensions of depressions, i.e., the busts that follow bubbles, and how markets can go into a freefall in such situations; the need for "a sense of orders of magnitude"--I take that to mean that the current crisis is not on the same order of magnitude as the Great Depression--stocks have sold off merely 40-45% from their peak. That peak occurred in Oct 2007, by the way; with a remarkably large portion of the drop occurring in the first half of October 2008.)

The clip ends with Ferguson's response to Zakaria's question about how people will look back on this period in history: "I think they will look back and say, you know what, there was actually one country at the heart of the global economy in the early 21st century, and it was called Chinamerica: China plus America, and these two economies were symbiotically linked, they were intertwined with one other. China did the saving, America did the spending. China made its funds available through currency interventions, and the United States took the money and piled on the debt. This worked pretty well for nearly a decade. It took us from the Asian crisis in '97-'98, right up to the American crisis that began in 2007. The question that historians will grapple with--and this is the thing that fascinates me now--is whether or not Chinamerica was able to survive this crisis. If China and America continue to interact economically, then it seems to me we're in with quite a good chance of avoiding another Great Depression."

I could continue transcribing, because it's quite fascinating--Ferguson sees two possibilities: China continues to support its export-based economy by continuing to buy "10-year Treasuries and other dollar-denominated securities" (i.e., those aforementioned currency interventions), and thus propping up the globabl market for those exports--by enabling further borrowing (bailouts) by the American government and consumer . Or, and this is what's truly fascinating, Ferguson says that China could turn inwards; China could say "we're going to focus on our own resources, our own consumption, we're going to say goodbye to the world market, and revert to being an introverted Middle Kingdom." This, Ferguson says, is the end of globalization, and is the scenario which Ferguson believes could take us back to the '30-style Depression: he argues that it was a breakdown of global trade which led to the protracted depth of the Great Depression.

For background on Ferguson, see his personal website and/or Wikipedia. His personal page is a much more extensive (and flashier) version of his faculty page at Harvard (where he has appointments in both History and the Business School).

I'd come across a few of his books on the history of empires, perhaps just while surfing through Amazon:

I bought a copy of the latter last year, as a gift for my father-in-law, since the British Empire is one of his favorite conversation topics. I just borrowed it back from him, with the intention of reading it soon..

It was only after the books above sparked my interest in Ferguson that I discovered he is also an expert in the history of finance: prior to his new "The Ascent of Money" book, he published a 2-volume history of the Rothschilds and also a book titled "The Cash Nexus":

So he's written enough to keep a student of history and finance busy for years. Apparently he's quite a teacher too. A friend took an intro undergrad course with him at Harvard; if I recall correctly, he said it was the best course he took at Harvard.

If you want to view more of Ferguson and get a better sense of the contents of his new book, turns out he did a documentary for PBS, also titled "Acsent of Money." It seems that it aired on most PBS stations just a couple weeks ago..but it also seems you can stream the whole thing through the PBS website.

It doesn't seem that I can embed the video from the PBS site; you'll have to go to the PBS site, which you can do by clicking thru on the following photo of lower Manhattan, which is what the documentary begins by showing:

Thursday, January 08, 2009

My plan this morning was to get out of the house early, head to one of the branches of the Brooklyn Public Library where I've got books to pick up. But around 10am I discovered that the branch I'd planned to hit today, Carroll Gardens, does not open til 1pm on Thursdays. And at just that moment, Brian Lehrer came on WNYC...

I've become addicted to Brian Lehrer's show--it's on 10am-12pm weekdays, and he deals with a wide range of current events, from the local to the international--and often the intersection of the two. For example, today's show which I had been hearing about all week, was an interview with Elliot Sander, the head of the MTA--the Metropolitan Transit Authority, which all of us who live in the NYC metropolitan area depend on for public transit.

Over the past couple months, since I've started using Twitter, I have occasionally been posting "tweets" (still don't like that term) about what Lehrer has got on the show. Today I took it a steo further and essentially used Twitter to take notes on Lehrer's interview.

To see them, you could go here and scroll back to find the relevant posts (it's recently been occurring to me that Twitter could the archiving and searchability a lot better, if in fact people are using this as a form of micro-blogging, as I am here).

The Brian Lehrer show led right into Obama's big speech this morning, on the proposed stimulus/infrastructure plan. So I decided to go with the flow and try live-blogging the speech via Twitter. Again, go to the SteadyBlogging Twitter feed I set up (for the ever-expanding SteadyBlogging empire!), and find the posts between 11-11:30am this morning (Jan 8, 2009).

The next step is to take these notes and use them to compose some actual thoughts. Look for that to appear here later this afternoon...after I get back from Carroll Gardens!

Saturday, January 03, 2009

We went out to dinner last night with some old-school UofC friends, and somehow the NYT came up. One of our friends mentioned that the Real Estate section is the first part of the Sunday paper she reads. I read it too, but usually later in the week..

One of their features is "Big Deal", on p2: it's usually 3 short item on big residential transactions--sort of NY real estate porn, for the 99% of the population that can't afford such real estate. The lead in tomorrow's Big Deal is truly a big (large) deal (a handful of the Sunday paper section actually get delivered on Saturday--the sections which aren't news-dependent), appropriately headline "Someone Still Has Money":

Despite faltering sales, it appears to be far too soon to declare the luxury market dead, especially now that we can raise a glass to what may be the most expensive condominium ever sold in the city, per square foot: a three-bedroom apartment on the 38th floor of 15 Central Park West, which changed hands for $27 million. The price works out to $9,480 per square foot, not counting the 22-foot-wide terrace facing Central Park.

Even so, that sale, filed with the New York City Department of Finance last week, reflects some of the new realities of the luxury market, now that the boom years are over. Deals are still being done, the records show, but often far below the asking price, and bankers and hedge-fund types, who once drove prices ever higher, are a fleeting presence.

It takes a detour into the type of non-hedge fund types who are still buying::

In deals that came together over the last month or so, the buyers included Bruce Nauman and his wife, Susan Rothenberg, who are both artists; an Italian fashion designer who sold his business just before the retail slowdown; some lawyers; and a wealthy writer who is a small-magazine publisher.

Or as David Javerbaum, the executive producer of “The Daily Show With Jon Stewart,” observed in an interview, “Having a comedy-writing job these days is steadier income than having a job on Wall Street.”

But the more interesting part is at the end, about the apartment in15 CPW--a building which was just built over the last couple years, in a rare instance of new construction overlooking Central Park (click on that link for an example of the views!). I happened to readan architecture review in the New Yorker(from Aug 2007) and have been noticing items about transactions in the building..the list of owners reads like a who's who of NY high finance; from the New Yorker review:

Among the buyers have been celebrities like Denzel Washington, Sting, Norman Lear, and Bob Costas, but, in truth, the more spectacular units went for prices that would make even a movie star blanch. The most expensive of all—a forty-five-million-dollar penthouse bought by the hedge-fund manager Daniel Loeb—was for a while the most expensive apartment ever sold in the city. A plurality of the buyers come from the world of finance, including Sanford Weill, the former head of Citibank, and Lloyd Blankfein, the C.E.O. of Goldman Sachs.

There was also a Market Movers blog post about that aspect of the building, titled "The Attraction of 15 CPW" (Market Movers is a great finance blog, btw.)

I'd walked by this building a few times--if you live in NYC, no doubt you have too: it's on CPW @ 61st/62nd, just north of Columbus Circle. (Click here) for a Google Map.) But it's not remarkable from the outside..but apparently quite fancy inside. (Google turned up

Back to today's NYT piece, which mentions Weill's apartment, and also the details of the recent sale:

The record-setting apartment on the 38th floor of 15 Central Park West at 62nd Street has 2,848 square feet, a lot by Manhattan standards (and a bit more than Mr. Javerbaum’s new apartment). But it lacks the spaciousness of some other apartments in the building.

It is small, for example, compared with the 6,744-square-foot penthouse bought in 2007 by Sanford I. Weill, the former chairman of Citigroup, for $42 million, or $6,287 a square foot.

Still, the apartment has 14-foot ceilings and huge windows with views on three sides. The master bedroom faces Central Park, the two other bedrooms face the Hudson River, and the living room looks south over the city.The seller was Richard T. Fields, a developer of casino resorts, who recently bought the Trump Marina hotel and casino in Atlantic City for $316 million.

Mr. Fields signed a contract to buy the apartment for $13.35 million in March 2006, while the building was under construction. But when he closed on it at the end of June 2008, he immediately put it on the market for $35 million.

Many people were amazed at the asking price. Mr. Fields was forced to reduce the price by 23 percent, but the property still set a record. The identity of the buyer was not disclosed in the city filing.

I'm not someone who's envious of the lifestyle of the very rich (and may or may not be famous..how many of have heard of Daniel Loeb, orAshok Varadhan, for that matter?). But I'm interested in real estate and architecture--esp in NYC, these days. And having been immersed in Wall St for a year or so, it's interested in see how that part of the city interacts with and affects other spheres of the city...and it will be interesting to see how all that changes, now that we've hit an inflection point (or rather, perhaps, a global maximum?) in the history of the city.

Friday, January 02, 2009

Here we are, at the beginning of 2009. Try as we might to live in the present moment, the habits of looking back (and forward) are not shed easily. I sat down this morning to write out some quick thoughts on 2008, but this ended up going in a different direction. Let me know what you think..

So, 2008: the famous, paradoxical, insistently inconsistent Dickens lines ring true: it was the best of times, it was the worst of times.

But the first hit, reassuringly (Google knows all), gave me what I was looking for--the whole opening passage, on quotationspage.com. Which is worth quoting in full:

It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.

A lot of that rings true...is it winter in America? Or morning in America? It all sounds very much like the present period indeed (though can someone unpack that last segment for me? "the superlative degree of comparison only"?? I lost him there..)

The most obvious examples of the two sides of 2008's metaphorical coin were the US presidential election and the financial/economic crisis. The bipolarity of it all was enhanced here in NYC--living at the epicenter of the latter, but also within the capital of blue America. The best thing I read on this was Kurt Andersen's piece in New York Magazine this fall, titled, appropriately, "Whiplash City", with the subhead "In this terrifying, giddy fall, our days are numbered like never before. And somewhere between the polls and the Dow lies destiny" and the following cover:

Andersen's virtuosic opening paragraphs:

So seldom do we motley millions all think and talk about the same thing at the same time—let alone two great big things, let alone intensely and continually for weeks at a time.

Welcome to the extraordinary fall of 2008. As the imploded financial industry is nationalized, and we prepare to elect—can it really be?—an African-American intellectual the next president, New Yorkers are in a kind of breathless, Twittery mind meld about matters of huge historic consequence. Because Wall Street is (excuse the expression) ground zero for the present cataclysm, we are probably experiencing financial vertigo more acutely than most of our fellow Americans. And yet at the same time, because something approaching nine out of ten New York voters will pull the lever for Barack Obama two weeks from now, we are at the same time brimming with uncanny, yes, hopefulness about the imminent change in national leadership and policy. Every day, crazily fibrillating numbers (the Dow down 777 points, the Dow up 936 points) make us feel sick, while another set of equally amazing numbers (Obama well ahead in every national poll, and tied or better in three southern states) puts a song in our hearts. This data-driven combination of sky-is-falling dread and OMG giddiness—meth-laced Ecstasy, anyone?—is bizarre, unprecedented.

Oddly, I didn't follow the numbers as closely as many this fall. I didn't watch the markets on a daily basis, and I wasn't obsessively checking fivethirtyeight.com in the lead up to Nov 4. That is odd, since (a) my thinking has become increasingly quantitative and data-driven; primarily due to the fact that (b) I worked on as a sort of "quant" on said Wall St; up until (c) my employment was swept up and away in said cataclysm; and finally, since leaving the Street, (d) I've become increasingly interesting in matters of politics, economics and policy.

Andersen's essay is worth reading in full; and also worth revisiting in, say, 7 years. (When we'll be on the cusp of 2015 going into 2016...just wanted to see what those digits looked like in type. They may seem so far in the future, but that's how far we are from 2001, which does not seem like that long ago: the lazy days of Bush vacationing carefree in Crawford in the first 8 months of his presidency; the remnants of the bursting dot-com bubble, with the housing bubble was not even a gleam in investors' (or Alan Greenspan's) eyes; the planes hitting and the two towers going down, and all that ensued...)

Andersen's next paragraph:

Exactly seven years ago, we had already become accustomed to the cliché that the previous month’s terrorist attacks had “changed everything.” As we know now, they did and they didn’t. (Irony, for instance, did not die.) Seven years from now, I’m betting, we’ll look back and reckon that this fall changed everything at least as much as the fall of 2001 did, and maybe more.

One of the fascinating aspects of living in NYC has been talking to people who lived and worked here in the city in Sept 2001--many of them, in fact, worked downtown at the time. Here is more from Andersen:

...as we discovered in the weeks and months after 9/11, there is some solace in the collective experience of disaster. Misery shared is preferable to misery alone, and an ebbing tide lowers all boats. It’s not just one overleveraged bank or brokerage in trouble, as it seemed at the start, but nearly all of them. Everyone who owns stock is watching their wealth shrink at more or less the same rate. And those of us who’ve fretted, passingly, about the growing extremes of economic inequality in America? That problem has been, um, addressed, by the free market: In just two months, the investor class has had its wealth reduced by $2 trillion or more. Thanks to the stock market, the rich got much richer, and now, thanks to the stock market, the rich are getting much poorer faster, in relative terms, than actually poor people.

A certain leveling is taking place. On the stoops and sidewalks of my Brooklyn neighborhood, there are lots of middle-aged men lounging all day long, comfortably pensioned-off former longshoremen and sanitation workers; I’m thinking that before long, the Upper East Side and Greenwich will acquire their analogous populations of robust, not-old guys without anything urgent to do every day.

I haven't quite noticed that in our Brooklyn neighborhood--but last time I took the bus out to Bread Stuy (way back in late Sept?), the proprietor (a wise, kind, and funny man) told me he'd definitely seen an uptick in non-rush hour business, plenty of new faces spending days in the cafe (a good counter-cyclical investment? a comfy, welcoming cafe in an slightly gentrified neighborhood, with reliable wifi and relatively affordable eats and drinks..)

Andersen nails it--I'm one of those (relatively) robust, not-old guys, lounging around with anything urgent to do. So going into '09, the question is, what to do if nothing is that urgent?

I'll close with Andersen's closing paragraphs, which circles back around to our data- and web-driven bipolarity:

...like so many people these last few weeks deeply invested in both equities and Obama, I’ve been toggling like a madman, compulsively and constantly, between Web-browser tabs: from the fever chart of the DJIA on Google Finance over to the national polling page on Real Clear Politics, then back to the Dow, then to FiveThirtyEight for analysis of the new tranche of polling data, back to the Dow, then the electoral-vote map at Pollster, back to the Dow, Real Clear Politics again for the latest state polls, and so on, dozens of times a day. The psychological result, of course, has been a high-frequency bipolarity—thrilled, depressed, thrilled, depressed—powered by Google.

The steadiness of Obama’s momentum has reflected (not coincidentally, I think) the soothing, absolutely even-keeled steadiness of his public manner since the crisis began. He’s come across like the person in the stuck elevator or subway car to whom all the freaked-out passengers instinctively grant authority. And for those of us obsessing over every tick in the financial and political metrics, it’s additionally reassuring to watch at least one of the graph lines moving in a continuously positive direction.

This is something that was remarked upon a lot through this remarkable campaign--Obama's temperament, his even keel; how he himself says that he doesn't let himself get too high over the highs, nor too low due to the lows. A middle way...

Andersen continues, with some anecdotes that echo Thomas Friedman's morning-after column (or rather, if anything, it's Friedman echoing Andersen), which I also posted some thoughts about (here), and that also refer to South Carolina, which coincidentally also came up recently (see here):

I do leave the computer screen sometimes and get out of the house. Back on the first of the month (the Dow still up almost at 11,000, Obama already five points ahead of McCain), I had dinner in the Village with a friend of mine who lives in the South. He’s middle-aged, wears a suit and tie, and probably voted in the past for a Republican presidential candidate or two. He told me, amazement in his voice, that two different South Carolina pals of his—well-to-do Republican white men his age—had confessed to him they were planning to vote for Obama: one because Palin was a deal breaker, the other because he thought that electing a black guy president would once and for all absolve white America of its historical racial crimes. And so when the conservative pundits started mutinying—Kathleen Parker, who has implied she’ll vote for Obama because of Palin, and William F. Buckley’s son Chris, who endorsed Obama last week—it didn’t shock me.

And, finally, Andersen's penultimate paragraph::

I’ve been saying for years and years that the eighties never really ended culturally and politically—not the way the fifties and sixties and seventies did. But 2008 will surely turn out to be the conclusion of an era. Reaganism—the utter devotion to deregulation and hypercapitalism, the unbending antipathy to the federal government, American power as nothing but cheerful bullying—is over. We all enjoyed playing cowboy until too many of us fell off our horses or got shot. The most fundamental form of American exceptionalism—that is, among all developed countries, our peculiar predisposition to magical thinking about human perfectibility and business schemes and supernatural salvation—won’t disappear overnight. But in our economics and politics sane people understand that we’ve reached that Wile E. Coyote running-in-midair moment where reality kicks in and he falls to the bottom of the cliff. Gravity (like evolution, and man-made climate change) exists.

Here Andersen reiterates an idea that's been in the air since the morning of Nov 5--that we have finally, belatedly, arrived at the end of the Age of Reagan. It's an idea I first came across in Leonhardt's long Aug '08 NYT Mag survey of "Obamanomics" (which I'm still planning on posting an annotated summary of!). Leonhardt attributes the idea to Princeton historian Sean Wilentz (see here), but then it popped up, unattributed, in George Packer's similarly themed essay "The New Liberalism", which appeared post-election in the New Yorker. And if Andersen has in fact been saying that for years and years..well, it goes to show we need to pay more attention to what he's been saying (you could start with this and this, both also from NY Mag and from this fall, both about this moment in time, about Obama and NYC (resp)).

Also in the paragraph above is the idea of the end of American exceptionalism, of moving into a post-American world--those are both titles of books, the first by Andrew Bacevich, the latter by Fareed Zakaria, that I've added to the ever-expanding to-read list for the new year.

And the ultimate paragraph, which also encapsulates a theme that's been on my mind: who is to blame for this mess we're in? To quote Mos Def (listen here, at about 1:20 in): me, you, everybody. We all got into this together, and we'll have have to get together to get ourselves back on solid ground:

We are, maybe, becoming a more reality-based nation again. We can no longer get by on tautological self-love, believing we’re smart simply because we’re New Yorkers, or virtuous because we’re Americans. The debacle caused by our reckless, party-hearty overleveraging of the economy should make us realize that we have met the enemy, and he is us. And then, if we’re lucky, we’ll redeem ourselves by fixing the huge messes we’ve made, and thereby discovering that we really are the ones we’ve been waiting for.